French Income Tax
Originally posted on & updated on 14th October, 2024
French rental income is always taxable in France, even if the landlord lives outside of France. To calculate the taxable income actual property expenses are deducted from the total rental income. Deductible expenses include repairs and maintenance, interest on debts, insurance premium, property taxes, agent’s fees, etc.
Alternatively, rental income may be assessed under the micro regimes under which a notional expenses deduction applies instead of deduction of actual expenses. The deduction is equal to 50% of the turnover for furnished lettings and 30% for unfurnished lettings. These micro regimes are only available when the taxpayer’s rental income from furnished properties is below €72,600 and below €15,000 for unfurnished rentals.
The micro regimes have the advantage that no detailed accounting is required, and you automatically have a deduction for expenses, even where your actual expenses are lower than 50% or 30% of the turnover.
Non-French tax residents pay French income tax on their French income only. The first €26,070 of income is taxed at 20%, and 30% above that limit. Higher rates apply to those with more than €74,545 of French income (up 45%).
In addition to income tax, France levies social charges at 7.5% on French rental income. This rate generally applies to non-French residents.
Income tax on rental income is paid by withholding tax at source. This takes the form of monthly or quarterly instalments debited directly from the landlord’s bank account. A tax return must then be filled with the French tax authorities each year (in May for non-French residents).
UK Income Tax
UK residents are also subject to UK income tax on their French rental income. The gross rents less any tax-deductible expenses paid by the tenant out of the rental income is taxable. Most property expenses are deductible, however, since 6 April 2020 residential mortgage interest payments are not deductible against rental income. Instead, a tax credit generally equal to 20% of the interest payments is deductible against the tax due for the year. The French rental income is then added to your other income and taxed at the standard 20%, 40% and 45% rates above the personal allowance as normal.
French Tax Credit
French income tax is deductible against UK income tax due on the same rental income. This also applies to social charges when these are levied at 7.5%. However, the higher of the two income tax liabilities will always remain payable. If the French tax is higher no tax will be due in the UK. If the UK tax exceeds the French liability then tax will be payable in France, and the difference between the two liabilities will be payable in the UK.
For Tax Advice
Our UK based French legal experts specialise in taxation, wealth tax, succession, etc… They have extensive knowledge of French tax system, contact François Mounielou at RWK Goodman.
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